The Center is a non-profit project that represents class members pro bono.

Wednesday, June 17, 2009

Welcome

This is the blog for the Center for Class Action Fairness, a non-profit project founded by Ted Frank to provide pro bono representation to consumers dissatisfied with court-appointed representatives in class actions, especially with respect to settlement approval.

I often get inquiries on what consumers can do when they get notice of a class-action settlement that benefits lawyers to the expense of consumers. Without attorneys like CCAF, the answer is usually nothing: asking for exclusion doesn't prevent the lawyers from cashing in; objecting without the help of an attorney will almost always be brushed off by the court; there is no financial incentive for an attorney to get involved, unless an objector wants to pay their tremendous fees—and there is certainly not an incentive for an objector to spend thousands of dollars to hire an attorney to object to a bad settlement.

Even when a lawsuit is plainly meritless, it costs defendants a lot of money to have litigators dealing with the case. Without a loser pays rule, it's cheaper for the defendants to pay trial lawyers protection money to go away. Because no one has an incentive to object, the settlements get rubber-stamped, and the trial lawyers go on to file the next extortionate lawsuit. And we all pay higher prices as a result.

In other cases, the lawsuit has merit, but the class lawyers would prefer to maximize their share of the settlement than do what is right for their putative clients: they structure the settlement in tricky ways that will minimize the total cost to the defendant while making it seem like their own outsized fees are justified. The defendant just wants the suit to go away as cheaply as possible, and doesn't care whether lawyers or consumers get the money. The class notice might be misleading: we successfully objected in one case where the notice implied that the class would get $9.5 million (thus making the $1.05 million attorney fee seem reasonable), when the class in fact got about $117,000.

CCAF hopes to change this by giving consumers another option: object, with a lawyer standing behind them to explain to a court why the law doesn't permit such an extortionate settlement that fails to benefit consumers.

By letting courts know that consumers are watching them, they'll be less likely to rubber-stamp bad settlements. If so, the lawyers won't try to unfairly profit at the expense of their clients. On multiple occasions, once we made it clear to the parties that we were going to object to settlements that shortchanged the class, they amended their settlements to provide millions of dollars more to class members. This is wonderful when it happens, but we'd like it to happen before we get involved.

There's an additional side benefit to scrutiny of class action settlements to ensure that the settlements aren't solely benefiting lawyers. If bad settlements aren't approved, then trial lawyers will be unable to profit off of bad cases. Without the promise of profit, the bad cases won't be brought. And we'll all be better off.

When I started this in 2009, I was a resident fellow with the American Enterprise Institute. I left AEI to do this full-time; in 2010, I became an adjunct fellow at the Manhattan Institute. CCAF is not affiliated with and is entirely independent from AEI and the Manhattan Institute.

In the words of Justice Brandeis, "Sunshine is the best disinfectant." It is important to bring attention to the all-too-frequent cases where lawyers try to misuse the class action system to rip off their clients. Here's a list of some of our press coverage.